Powered by

India-Australia free trade agreement comes into force today

The agreement will see a reduction in customs duty on Australian wines


A tale of milk and wine? Or rather, a tale of two drinks and their very different fates — that could well be the billing when the eventual story of the ambitious free trade agreement (FTA) between India and Australia, which comes into force today Thursday, is finally written.

Milk does build muscle, as the impact of sheer lobbying power has seen the influential domestic dairy industry ensure that all milk and allied dairy products were kept outside the purview of the India-Australia Economic Co-operation and Trade Agreement (ECTA).

However, much to the chagrin of the domestic wine producers, the agreement will see a reduction in customs duty on Australian wines, even if in a staggered manner. Thus while India normally imposes a hefty 150 per cent duty on imported wines, this will be reduced to 100 per cent and subsequently to 50 per cent in 10 years for wines costing $5 (USD) per bottle. Duty on those costing up to $25 will be reduced to 75 per cent and subsequently to 25 per cent.

For the domestic winemakers, the only solace is that this could help grow the larger wine consumption patterns in India, with the price discounting applicable more for more expensive wines. This would mean there wouldn’t be much price change for wines in the sub-2,000 rupees market, the segment in which most Indian wine brands like Grover and Sula retail. 

Wine is only one aspect of the ECTA — from today, more than 96 per cent of India’s exports to Australia will now get zero duty benefit (the reverse is true only for 85 per cent of Australia’s exports to India) and the bilateral trade is expected to double to $45 billion in just five years. Critical minerals and ingredients for the Pharma industry will get cheaper as import duty goes — the idea is that this will give a fillip to the ‘Make in India’ endeavour. 

Travel, study and work rules for young Indians will also be relaxed as per the free trade agreement, opening up new avenues for young Indians. Garment exports to Industry could also witness a massive surge once duties are cut.

Signed back in April, the Australia-India is expected to be only the first in the Modi government’s push for bilateral trade agreements that will help India expand its trade basket, even while offering it an alternative to the China-backed RCEP free trade initiative which India has snubbed and walked out of a few years ago.

While the Australia deal is the first time India has discussed and agreed on relaxation for wines, it seems heady elixirs will now very much be part of almost all future negotiations. Cutting duties on Scotch whisky is a major ask from London during the India-UK free trade negotiations, which has already overshot its original Diwali deadline. India’s on-again, off-again courtship of the European Union for a similar deal could also see wines and cognacs on the table.

📣 The Week is now on Telegram. Click here to join our channel (@TheWeekmagazine) and stay updated with the latest headlines